Every business venture has its pitfalls. There are always mistakes to be made, and you’ll probably make plenty of them as an investor. The world of real estate is constantly changing and you have to keep your eye on a million different details. But there are some mistakes that others have made that we can all learn from. We aren’t perfect investors, and we know that there are some mistakes you can avoid from the get go, and we want to help you!
Making a budget for anything is always a difficult task. There is a lot of forecasting and projections, and there is a great margin for error. More often than not, you’ll find yourself with a handful of kinks that can only be worked out monetarily. This is why it is imperative to have a rock solid underwriting analysis process that includes cash reserves as part of the numbers and the ability to walk away from a deal when it is just too far outside of what makes it a good deal and what will cause investors to invest in the first place. Remember to also take extra repairs, maintenance, and management costs into consideration. Your projections set the stage for your operating budget that gets put in to action once the asset is being managed. Make sure that before you embark on your venture that you know your loan options and terms and you have an excellent backlog of other investors.
It is easy to get sucked into the idea that finding a property, and closing will be a quick process. But in reality, you could look at hundreds of properties, run the numbers on 50 or so, and underwrite dozens before you find the one that fits all of your criteria. There are so many factors that go into acquiring a property, and it is foolish to believe that it will be a quick process. Make sure to have a realistic time frame in mind so that you can budget appropriately. Talk to other local investors who are vested in similar properties and try to find a realistic timeline for your project.
Also make sure to budget extra time from when you acquire the property to when it will be working at full capacity. Since we work in B and C class properties, we are well aware that there will be a transition time from when we close on a property to when all of our add value renovations will be complete. And we believe that it is far better to be done a little earlier on your worst case scenario date, than to be a month later than you had planned.
If you are a real estate investor in the Charlotte, North Carolina area and you are looking for properties in the Carolinas, let us help! Here at Magnolia Design Properties, we are a dedicated to finding the best properties for you, our investors and we are committed to working with one investor client, one property at a time. You can be assured that we will devote our time to making your investment work for you! Head to our Multifamily Investments page and fill out our accredited investor form so that we can help you find the properties that will work for you.